THE Treasury is considering plans to privatise its holdings in RBS and Lloyds by distributing their shares among all of the UK’s 45m taxpayers, City A.M. has learned.
Under the scheme, put together by Portman Capital for the Centre for Policy Studies (CPS) and led by CPS chair Lord Saatchi, the government’s 41 per cent Lloyds stake and 83 per cent RBS stake would be divvied up among taxpayers, who would have to pay back a “floor price” for the shares only when they resold them.
The floor price would be set at a level that enables the Treasury to break even on its £66bn bailout of the two banks, with any profits from selling above that price kept by taxpayers and subject to an 18 per cent capital gains tax (CGT).
City A.M. understands that the Treasury has been enthusiastic about the scheme in several rounds of feedback so far and is considering it among a range of options.
Michael O’Connor, partner at Portman Capital who came up with the plan, said: “The reason this works is that you get rid of the structural overhang. Every time there’s a rumour of a share placing, the banks’ share prices go down… We need to create a positive dynamic for the share price.”
He estimates that taxpayers would profit to the tune of £520 each before tax, and could be exempted from CGT if they paid the floor price to the Treasury up front. It would cost up to £250m to deliver, O’Connor says.